WARNING: Investors Should Be Wary of Fad (Read: BAD!) Decisions

Fads are a wonderful thing. They tell us how to dress, what music to like, and what items to purchase. They provide corporations with billions of dollars in profits and give investors an excuse to buy and sell stocks in large quantities. But just as teenage boys eventually realized that baggy jeans aren't cool (who knew?), investors will eventually discover that they shouldn't move on fads alone, regardless of the circumstance. Case in point: this morning,

cited analysts who believe that Nintendo's (

) recent share decline is tied to the company's lack of social networking content on

. While this is only the opinion of a few analysts, not the actual investors who bailed on the stock, their words are very troubling because it creates the perception that social networking is the primary factor in the company's decline. But there are many other elements that could have been responsible for Nintendo's downturn. First, the Wii U itself: while the console shows a lot of promise, its E3 debut was fairly underwhelming. Instead of announcing a whole slate of games being designed in-house – the very games people buy a Nintendo console to play – the company focused on software from third-party developers. Since most of those games will also be released on Xbox 360 and PlayStation 3, it is very unlikely that they will help Nintendo sell its new machine.

is what investors should be concerned about – the absence of games that are capable of persuading consumers to buy a Wii U. Never mind social networking, which is a growing (but still unproven) subset of the game industry. Investors need to pay attention to how many games Nintendo is making, and how many games it plans to release. No matter what fads or trends occur in the game industry, Nintendo's success will always be determined by the number and the quality of its games. Right now, the Wii U launch lineup is one great big question mark. That is not a good sign. Historically, the number of games released at a console's launch is much smaller than the number of games that are shown when the console is first revealed. Assuming that's the case for Wii U, its launch will be one of the worst in Nintendo history. Come 2012, it would be nice to think that Nintendo will unveil a wide selection of stellar Wii U launch games. If we are to look at this realistically, however, we must not forget what happened when the Nintendo 3DS arrived earlier this year. Unlike the Nintendo Wii and the original DS, which had a steady flow of desirable games, the 3DS arrived without a single game people could not live without. Consequently, Nintendo 3DS sales have been terrible. The system should have been flying off the shelves (after all, more than 120 million people purchased the original DS). But consumers are not impressed. This could be one of the key reasons why investors are losing interest in Nintendo. Another possible factor: in the past, Nintendo has used its E3 press event to brag about its sales figures. This year, the company did not provide any sales data whatsoever. Investors who follow the Wii maker closely may have seen this as a red flag. If Nintendo isn't bragging, does that mean the company does not have anything to brag about? Whatever it means, investors need to realize that there are many reasons to move on a company. Fads should not be one of them.